Myanmar: a coup, a civil war, a crisis and China

Myanmar was heading in the right direction after decades of isolation before the army seized control again in February. Now the outlook is increasingly grim.

It’s been a grim year for Myanmar. Following a decade of relative political freedom, the army seized power in a coup on 1 February, after the election commission rejected their unfounded claims of voter fraud in the November 2020 general election.

Since then, an estimated 1,200 people have been killed by security forces, and more than 10,000 people jailed (including the elected leader, Aung San Suu Kyi). The economy has nosedived and hundreds of thousands of people have been forced to flee their homes as a result of fighting between government forces and regional militias in several parts of the country.

Is it a civil war?

There are echoes of the first year of the Syrian civil war a decade ago. There, too, initially peaceful protests were met with overwhelming force by the state, leading to a conflict that deepened along existing fault lines.

In the case of Myanmar, those fault lines are ethnic and regional. The Karen, for example, in the south-eastern region bordering Thailand, have been fighting the Tatmadaw (the Burmese armed forces) for much of the 74 years since the country gained independence from Britain. But the fighting had eased since 2012, and the military’s airstrikes on the region in March and April were the first for 25 years.

In the northern Chin state, this autumn has seen the brutal suppression of an insurgency that some reports suggest is comparable to the “clearance operation” perpetrated by the army on the Rohingya in Rakhine state in 2017. The military junta’s leader, Min Aung Hlaing, has mobilised troops, equipment and supplies to northern and western Myanmar in an offensive timed to coincide with the end of seasonal rains.

How is the economy?

After a promising decade of liberalisation and strong growth, Myanmar's economy has tanked. Starting in the early 1960s, Myanmar suffered from half a century of semi-isolation under military rulers pursuing the “Burmese road to socialism” which left Myanmar among the poorest countries in Southeast Asia. The main sectors are agriculture, timber, garment manufacturing, oil and gas, and gemstones; there is also a large (illicit) drugs production industry in the eastern Shan state.

The country has long been an economic under-achiever, and its GDP per head remains lower than neighbours such as Laos, Cambodia and Bangladesh. But since 2012, the Burmese economy has seen significant reforms alongside the political opening, leading to expansion of sectors including manufacturing and tourism.

How much did it improve?

Myanmar’s reforms to the foreign-exchange system, liberalisation of markets, integration into the regional economy, and the modernisation of economic and financial institutions had all contributed to rapid economic growth averaging above 7% per year, according to the World Bank. Poverty levels almost halved, falling from 48% to 25% between 2005 and 2017.

That progress was already slowing in recent years, and 2020 saw a slowdown due to the Covid-19 pandemic. But in 2021 the economy has been in freefall, with GDP shrinking by 18% in the year to September.

What’s happened?

The February coup caused parts of the economy to seize up, as civil unrest and mass strikes gripped the country. It also triggered a freeze on parts of Myanmar’s foreign reserves held in the US, suspension of multilateral aid, and a range of sanctions by Western nations (including the US and UK) on military-linked conglomerates and the state-run gem company. A plunge in the currency and unprecedented dollar shortage also drove up the cost of imports and crippled the economy.

Foreign direct investment into Myanmar has fallen, with some multinationals heading for the exit. Ironically, a main driver for the army’s decision to open up was its desire for a pivot to the West in the face of China’s rise. But the turmoil has left it more vulnerable to Chinese interests than ever.

What is China’s interest?

Stability and protection for its investments, most notably a $2bn oil and gas pipeline, and a planned deep-sea port that will enable China to import oil and gas via the Bay of Bengal. Immediately after the coup, China was reluctant to get behind the military regime.

But attacks on Chinese factories in Yangon in March were a turning-point. Although it is maintaining lines of communication with the NLD, the overthrown ruling party, Beijing is now working on the assumption that the junta will eventually establish effective control of Myanmar, said John Liu and Thompson Chau in Foreign Policy. “More than nine months since the coup, Chinese officials have largely normalised engagement with the regime, even if they harbour some doubts over the generals’ ability to run the country”.

Beijing’s aim is to “sit out the deepening crisis and push ahead with its own interests in Myanmar with the group that holds power”. 

What will happen next?

The coming year looks grim, since the army is neither so strong that it can restore stability, nor so weak that it can be toppled – meaning there’s every chance of prolonged turmoil, said The Economist.

Protestors-turned-guerrillas will continue to launch attacks on army targets, while “emboldened ethnic-minority militias, who have long waged wars of independence, will press their advantage against stretched armed forces”. Expect the government to restore its depleted coffers by selling off timber, jade and rare metals to companies owned by the armed forces, lining their own pockets in the process.

If the military prevails – the likeliest outcome – Myanmar “will almost certainly revert to its historic status as a relatively isolated, underdeveloped and impoverished economy that benefits only a small military elite and their crony business associates”, said Htwe Htwe Thein and Michael Gillan in East Asia Forum. The Burmese people will “continue to suffer”.

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